Rental Credit Wage Laws – Property Managers
(1) Whether a property management company is allowed to compensate a property manager and/or maintenance personnel with rental credit instead of wages, in spite of substantial hours worked, minimum wage hours and lack of an agreement that provides for such compensation?
(2) Is Brock v. Carrion, the case on point, overruled by Von Nothdurft v. Steck? If so, on what grounds. If not, what does this case stand for and has it been overruled?
Probably not, in regards to both questions. The court will likely find that the property management company cannot offset the wages. In determining wage offset under California state law, the court must analyze two relevant statutes, California Labor Code section 1182.8 and Wage Order No. 5.
Section 1182.8 states:
An employer may charge a resident apartment manager up to two-thirds of the apartment’s fair rental value, provided that: (1) there is a voluntary written agreement, and (2) no credit for the apartment’s value is used to meet the employer’s minimum wage obligations. Brock v. Carrion, Ltd., 332 F. Supp. 2d 1320, 1328 (E.D. Cal. 2004).According to California’s Department of Labor Standards Enforcement (“DLSE”) construes this section to require an employer to pay resident managers gross wages at least equal to the minimum wage after the apartment charges imposed by the employer are taken into consideration. Brock v. Carrion, Ltd., 332 F. Supp. 2d 1320, 1324 (Cal. 2004). Further, Wage order No. 5. states: “Meals or lodging may not be credited against the minimum wage without a voluntary written agreement between the employer and the employee. When credit for meals or lodging is used to meet part of the employer’s minimum wage obligation, the amounts so credited may not be more than . . . two-thirds (2/3) of the ordinary [apartment] rental value, and in no event more than:$ 324.70 per month (effective March 1, 1998 through January 1, 2001), and $ 352.95 per month (effective January 1, 2001 through January 1, 2002). Cal. Code Regs., tit. 8, § 11050, subdiv. 10(C) (2001). In addition, Wage Order No. 5 prohibits an employer from charging rent in excess of the above values, where the apartment is provided as a condition of employment.” Id.
Lastly, Carrion is not overturned by Von Nothdurft v. Steck,227 Cal. App. 4Th 524, 526 (2014), and they address different issues. Carrion states the law, and explains the outcome absent an agreement, whereas Steck addresses a voluntary agreement between two parties in which the plaintiff is seeking wages in spite of said agreement. The plaintiff in Steck argues that the agreement was unconscionable and made under misrepresentation. Our client argues, either no such agreement exists or if it does, it would violate the Wage Order.
First, the court must find a voluntary agreement. In such case an agreement is found, one must analyze, (1) whether the value of the living quarters were “reasonable” and (2) if the agreement itself is a valid one.
Under Federal Law, “reasonable” is defined as not more than the actual cost to the employer, for board, lodging or other facilities. Id. State law provides that an employer may charge up to 2/3 of an apartment’s fair rental value. Here, without information of the value of the apartment or costs to the employer, it is difficult to conclude whether the living quarters were reasonable. Therefore, costs must be analyze using the above rule.
Validity of Agreement
An agreement is valid so long as it is (1) a voluntary agreement, (2) between the employer and employee and (3) explicitly reference that such credits are being applied toward the minimum wage obligation of the employer and (4) it satisfies Wage Order No. 5. 227 Cal. App. 4th at 1330. A resident manager must prove unconscionability, misrepresentation, or another contract defense in order to prove an agreement was invalid. In Steck, the resident manager sought to recover wages for all of her work without deduction for the amount of rent for her apartment; which she received for free as part of her management agreement. Id. The main issue in this case was whether the written agreement between the parties satisfy the requirements of Wage Order No. 5, sufficiently to permit defendant/respondent to take a credit of $451.89/ month against plaintiff’s right to receive minimum wage. Id. The court held that written agreement satisfied Wage Order No. 5, to allow the owner to take rental credit
Unlike Steck, where both parties agreed to the terms, the owner asked the manager to go home and look over the agreement and come back with revisions; here, there is no information indicating there was such of a meeting of the minds. On one hand, Carrion’s plaintiff did sign an employment agreement which states that the apartment was a condition of employment. However, the primary difference between this agreement and Steck’s is that The Employment Agreement does not specifically state that the apartment was being credited toward defendants’ minimum wage obligation to plaintiff. 332 F. Supp. 2d. at 1322. Therefore, the parties did not enter into a valid written agreement because statutory language requires explicit wording that such credits will be applied to the minimum wage obligation. Id. At 1331.
In sum, Steck’s issue addresses whether the agreement is valid, record, our client has not been fairly compensated because the employer has not met minimum wage obligations.